What counts as lowering your gross income for tax purposes?

[psychocandy]

OK. Just trying to make sure my dear wife doesnt go into higher tax bracket this year. Although the government look like they might u-turn on this, it might mean the end of child benefit. Not a huge amount but, hey, £80 a month.

OK, say with her own job and dividends, her gross income is £44K. Taking into account allowances this is, unfortunately, over the tax bracket (£42K?)

However, she pays into pension directly from salary - say this is £2K per year she pays in.

Also, childcare vouchers - £480 a year.

And, bike to work crap thing - £480 a year.

Do all of these become deductible off the gross salary so it now equals 44000 -2000 -480 -480 = 41000ish? So OK now?

Or am I wrong?

[topper]

Depends on the pension really, when you say "Pays from Salary", do you mean it's a salary sacrifice pension? If it's an Employers or Private pension scheme then the £2000 doesn't come off Gross Earnings but Salary Sacrifice Schemes do.

The CCVs also count as they are taken off gross earnings (hence less taxable earnings), not sure about the Bike thing, presuming it's the same deal?!?!

So if she does have salary sacrifice and the CCV and Bike thing are the same, rough calcs should be,

Gross Taxable Pay £41,040.00 (44000-2000-960)
Tax Free Allowance £7,479.00
Total Taxable= £33,561.00

Providing her Tax code is the full whack and it's not reduced via Health Insurance or any other BIK.

That is my view\calculations anyway, happy to be proved wrong!

BTW What Childcare only costs you £40pm??!?!! I want some of that, my CCV's are the full £243 and I still have to top it up!

[psychocandy]

Depends on the pension really, when you say "Pays from Salary", do you mean it's a salary sacrifice pension? If it's an Employers or Private pension scheme then the £2000 doesn't come off Gross Earnings but Salary Sacrifice Schemes do.

The CCVs also count as they are taken off gross earnings (hence less taxable earnings), not sure about the Bike thing, presuming it's the same deal?!?!

So if she does have salary sacrifice and the CCV and Bike thing are the same, rough calcs should be,

Gross Taxable Pay £41,040.00 (44000-2000-960)
Tax Free Allowance £7,479.00
Total Taxable= £33,561.00

Providing her Tax code is the full whack and it's not reduced via Health Insurance or any other BIK.

That is my view\calculations anyway, happy to be proved wrong!

BTW What Childcare only costs you £40pm??!?!! I want some of that, my CCV's are the full £243 and I still have to top it up!

Ummm, not sure about the pension - she works for NHS so its NHS pension. I thought pension contribs still came off gross though? No BIK with the NHS....

Bike is Bike to work and Im pretty sure that comes off gross. Childcare does deffo.

Childcare is just a few evenings a week in after-school club for the boy. £5 a pop. 3-30pm till 5-30pm. Quite handy it is too if Mrs is working late (shes a nurse). Means I can pick him up then.

Be screwed with this is I worked away from home too far though. Luckily, its 30 mins drive to school from client.

[topper]

Not sure, be worth checking and a payslip should tell you! If she benefits from tax relief for it then yes it should count to lowering the taxable income, and hence below the higher rate.

Are you sure they actually use the same calculations for Working Tax Credit though? Would presume so!!

[psychocandy]

Not sure, be worth checking and a payslip should tell you! If she benefits from tax relief for it then yes it should count to lowering the taxable income, and hence below the higher rate.

Are you sure they actually use the same calculations for Working Tax Credit though? Would presume so!!

Nah. Not on about working tax credit. No chance of bugger all tax credits on a contractors income mate.

BBC News - Child benefit to be scrapped for higher taxpayers

Just checked and its 2013 its coming in not this year as I thought. Looks like it might get canned too.

Not sure how it'd work but obviously if it depends on previous years income, it wouldn't be wise to got £10 over into the upper bracket to then loose £80+ month in child benefit.

[topper]

Sorry mate, that's what I meant, was having a blonde moment!!

Least if it's 2013 you have a year to plan your income during 12/13! Good Luck!

[psychocandy]

Sorry mate, that's what I meant, was having a blonde moment!!

Least if it's 2013 you have a year to plan your income during 12/13! Good Luck!

Yeh. Exactly. I assume it'd all be based on 12/13 income....